Accumulate Chambal Fert; tgt of Rs 113: Unicon Investment

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Accumulate Chambal Fert; tgt of Rs 113: Unicon Investment

Unicon Investment is bullish on Chambal Fert and has recommended accumulate rating on the stock with a target of Rs 113 in its August 16, 2011 research report.

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Unicon Investment is bullish on Chambal Fert and has recommended accumulate rating on the stock with a target of Rs 113 in its August 16, 2011 research report.

"Chambal Fertilisers & Chemicals Ltd (CHMB) posted Q1 FY12 results inline with Unicon estimates. Total Income grew by 21.3% YoY to INR 11,839mn in the quarter. Fertiliser segment showed a robust sales growth of 33% YoY due to sharp increase in urea volume (28% YoY). Fertiliser trading division reported a growth of 61% YoY to INR 2.9 bn. Shipping and textile segments contributed 8% and 6% respectively to the topline of the company. CHMB has decided to demerger its shipping business, which is facing turbulent times in the challenging macro environment. The new entity would be called 'India Steamship Ltd.' and the demerger ratio is fixed at 1:8. The management plans to infuse a fresh capital of INR 3.4bn and hold 44% stake in the new company."

"EBITDA remained flat around INR 1.7bn while EBITDA margin contracted by 300bps to 14.6%YoY, due to margin contraction in shipping and textile segments. Rising cotton prices directly affected the inventory cost of textile division while shipping was affected by slowdown in the global markets. Net profit also remained flat around INR 640mn while net profit margin shrunk by 118bps to 5.4% YoY. Losses in textile segment (INR 11mn), margin contraction in shipping and higher profit from traded goods affected the bottomline of the company."

"CHMB would benefit from growing urea demand on the back of healthy monsoon in 2011, rising urea prices (currently USD 550 per tonne, demerger of shipping business and talks of urea decontrol. Change in Urea investment policy provides further opportunity for capacity expansion. Stock is trading at 10.7x its FY13E earnings. We recommend ACCUMULATE with a price target of INR 113," says Unicon Investment research report.  

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To read the full report click on the attachment